381 Southwark Park Road RTM Company Ltd & Ors v Click St Andrews Ltd & Anor

Factual and Procedural Background

This case concerns defects and damage to a block of flats known as St Andrews House, located at 381 Southwark Park Road, London SE16. The first claimant, RTM Company Limited ("RTM"), is a residents' right to manage company incorporated in August 2018. The second to eleventh claimants are leasehold owners of flats in the Property and participating leaseholders in RTM.

The first defendant, "Click St Andrews," was the freehold and head lease owner of the Property and a wholly owned subsidiary of the second defendant, "Click Group Holdings." RTM and the defendants entered into a Freehold Purchase Agreement ("FPA") in February 2020, under which Click St Andrews was to develop the Property by adding an additional storey with three modular units, after which RTM would purchase the freehold and grant leases to Click St Andrews for the new flats.

The claimants allege that during the installation of the modular units in July 2021, adverse weather caused water ingress and damage due to inadequate weatherproofing after the pitched roof was removed. The defendants made some remedial efforts, which the claimants contend were inadequate and incomplete. Experts were engaged by the claimants who identified further defects, including structural and fire safety issues. A Dangerous Structure Notice was issued by the local council shortly before trial.

The claimants advanced claims for breach of the FPA, breach of the guarantee by Click Group Holdings, breach of lease covenants (notably quiet enjoyment), and claims in negligence, nuisance, and breach of statutory duty under the Defective Premises Act 1972 (DPA). The defendants denied liability, contending among other things that the FPA had been rescinded, that RTM had no proprietary interest at the time of loss, and that the rainfall was unprecedented and overwhelmed reasonable waterproofing measures.

Procedurally, Click St Andrews was wound up and debarred from participating in the proceedings due to non-compliance with court orders, while Click Group Holdings remained represented at trial. No witness or expert evidence was served on behalf of the defendants. The claimants obtained and maintained a freezing injunction against the defendants to preserve assets.

Legal Issues Presented

1. Whether the defendants breached the Freehold Purchase Agreement by failing to carry out the works with due diligence and in a workmanlike manner, resulting in water ingress and damage.
2. Whether the purported rescission of the FPA by Click St Andrews was valid and its legal effect on the claimants' rights to damages.
3. Whether RTM, as nominee purchaser and freehold owner, can recover leaseholders' losses and damages under the FPA and guarantee.
4. Whether the leaseholders have claims against Click St Andrews for breach of covenant of quiet enjoyment, negligence, nuisance, and breach of statutory duty under section 2A of the Defective Premises Act 1972.
5. Whether the defendants breached insurance obligations under the leases and the FPA.
6. Whether the claimants are entitled to a Building Liability Order under the Building Safety Act 2022.

Arguments of the Parties

Claimants' Arguments

• The removal of the pitched roof and inadequate waterproofing during the works breached clause 5.2 of the FPA requiring works to be done with due diligence, in a good and workmanlike manner, and using good quality materials.
• The defendants failed to provide adequate protection despite weather warnings, and the works caused water ingress and damage to the flats.
• The purported rescission of the FPA by Click St Andrews was not a rescission ab initio but a termination, leaving claims for damages intact.
• RTM, as nominee purchaser and freehold owner, is entitled to recover damages for breaches of the FPA and guarantee, including losses suffered by leaseholders.
• The leaseholders have claims for breach of quiet enjoyment, negligence, nuisance, and breach of statutory duty under section 2A of the DPA.
• The claimants seek a Building Liability Order under the Building Safety Act 2022 due to building safety risks identified, including structural and fire safety defects.
• The defendants failed to carry out adequate remedial works, including drying out, fire safety measures, and structural repairs.
• The defendants failed to maintain adequate insurance as required by the leases and the FPA, or failed to properly apply insurance proceeds to repairs.

Defendants' Arguments

• They purported to rescind the FPA under clause 13.6 due to failure to serve Completion Notice by the Extended Longstop Date, which they argue terminated the contract and precluded breach claims.
• RTM had no proprietary interest in the Property at the time of loss and therefore suffered no loss.
• The water damage was caused by unprecedented rainfall that overwhelmed waterproofing measures, negating breach.
• The claimants contributed to their own losses and failed to mitigate by not cooperating with remedial works.
• The protection provided (a Visqueen membrane) was appropriate for normal rainfall and the works were reasonable in light of weather warnings.
• No breach of insurance obligations has been clearly established.
• The leaseholders do not have rights under the FPA as they were not parties to it, and RTM cannot stand in their place for individual claims.
• Defence relied heavily on legal arguments drafted by counsel; no witness or expert evidence was served or called on defendants' behalf.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Buckland v Farmar & Moody [1979] 1 WLR 221	Interpretation of the term "rescission" in contract law; rescission may mean termination rather than rescission ab initio.	The court applied this principle to interpret the purported rescission of the FPA as termination of the contract, leaving accrued rights intact.
Hardy v Griffiths [2014] EWHC 3947 (Ch)	Contractual right to rescind does not necessarily result in rescission ab initio; rights accrued prior to rescission survive unless expressly discharged.	The court relied on this authority to hold that RTM's rights under the FPA survived the purported rescission.
Trinity Church Square v Trinity House of Deptford Strond [2016] UKUT 484 (LC)	Statutory interpretation regarding nominee purchasers and rights of leaseholders in enfranchisement.	The court found this decision did not support the proposition that RTM could stand in for leaseholders' individual claims under the FPA.

Court's Reasoning and Analysis

The court carefully examined the contractual provisions of the FPA, statutory background, and the factual circumstances surrounding the works and damage. It concluded that the purported rescission by Click St Andrews under clause 13.6 did not amount to rescission ab initio but rather terminated the obligations to sell and buy, leaving accrued causes of action for breach intact. This interpretation was consistent with established case law and the statutory purpose of RTM companies in enfranchisement.

The court accepted that RTM, having acquired the freehold, was entitled to recover substantial damages for breaches of the FPA and that the guarantee by Click Group Holdings extended to such damages. The court held that RTM could recover leaseholders' losses related to breaches of lease covenants and the FPA, as RTM assumed the burdens and benefits of the leases upon acquisition of the freehold, supported by the Landlord and Tenants (Covenants) Act 1995.

Regarding the water ingress, the court found that Click St Andrews breached clause 5.2 of the FPA by failing to provide adequate waterproofing protection during the removal of the pitched roof and installation of the modular units, especially in light of weather warnings. The Visqueen membrane was found inadequate as temporary protection, and the failure to delay works in the face of weather warnings was a breach. The court rejected the defendants' argument that exceptional rainfall absolved them of liability for inadequate protection.

The court also accepted expert evidence identifying structural defects, fire safety deficiencies, and other workmanship issues amounting to breaches of the FPA and lease covenants. Remedial works were necessary to address these defects, and the defendants were liable for the costs.

Claims regarding insurance were examined, with the court noting breaches in principle of insurance obligations under the FPA and leases but acknowledging that insurance cover was limited or declined, thus limiting damages recoverable on that basis.

On the leaseholders' claims, the court found that they had valid claims against Click St Andrews for breach of covenant of quiet enjoyment, negligence, nuisance, and breach of statutory duty under section 2A of the DPA. However, the court did not find it necessary to determine whether an extended duty to carry out works fit for purpose was owed in tort, as the claims on other bases sufficed.

The court rejected the defendants' mitigation arguments, concluding that there was no evidence of systematic refusal of access to carry out remedial works and that leaseholders' caution in granting access was understandable.

The court declined to rely on the Dangerous Structure Notice due to lack of supporting survey evidence and specificity.

Finally, the court addressed the quantum of damages, accepting expert valuations and awarding sums for remedial works, individual leaseholder losses, distress, and inconvenience, with some reductions where claims lacked sufficient evidential support.

Holding and Implications

The court held that:

• The purported rescission of the FPA by Click St Andrews was a termination of the contract, not rescission ab initio, leaving RTM's claims for damages intact.
• RTM, having acquired the freehold, is entitled to recover damages for breaches of the FPA and related guarantees from Click Group Holdings.
• RTM may recover leaseholders' losses related to breaches of the leases and the FPA, preventing double recovery but allowing consolidated claims.
• Click St Andrews breached the FPA by failing to provide adequate waterproofing during works, resulting in water ingress and damage.
• There were additional breaches related to structural and fire safety defects, inadequate remedial works, and insurance obligations.
• The leaseholders have valid claims against Click St Andrews for breach of quiet enjoyment, negligence, nuisance, and statutory duty under the DPA.
• The defendants are liable for damages quantified in the judgment, including costs of remedial works and individual losses.
• Any application for a Building Liability Order will be considered at a further hearing following this judgment.

Implications: The decision directly affects the parties by affirming RTM's and leaseholders' rights to damages and confirming the defendants' liabilities. It clarifies the legal effect of rescission clauses in conditional freehold purchase agreements and the scope of RTM's capacity to recover leaseholders' losses. No new precedent beyond the application of existing principles was established, and further proceedings remain for the quantification of damages, costs, interest, and any Building Liability Order.